Daily Digit: New rescue model for Co-op bank

Sunday, June 16, 2013 - 01:16

June 17 - Britain's Co-operative Group has agreed a plan to plug a 1.5 billion pound capital hole at its bank which forces bondholders to pay part of the bill, avoiding a repeat of the taxpayer-funded bailouts staged during the financial crisis. Ciara Sutton reports.

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1.4 billion pounds is today's daily digit in Europe - the hole in the balance sheet at Britain's Co-operative Bank.
It's set to be tackled with a new style rescue deal which forces bondholders to pay part of the bill.
The so-called "bail-in" involves swapping debt for new bonds and equity.
The bank will also be listed on the London Stock Exchange.
And the rest of the Co-op Group, Britain's biggest customer-owned business, will provide financial support.
Breakingviews Robert Cole says the new plan could become a model for other struggling lenders.
(SOUNDBITE) (English) BREAKINGVIEWS ASSISTANT EDITOR, ROBERT COLE, SAYING:
"There's no new state capital going in, in stark contrast to all those big bailouts we had five years or so ago, which is good because we don't have any money. But it's also good because the people who are responsible are having to pay the price."
The Co-op bank has five million customers.
Questions about it's future emerged after Moody's cut its credit rating to junk status, warning it might need taxpayer support.
But the bank has denied this.
And the Co-op Group, which also runs supermarkets, funeral services and pharmacies, says the "bail-in" will generate a billion pounds of new capital this year.

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